Why employee engagement is a major worry
Many companies do performance appraisals as a ritual and most firms witness the highest rate of attrition after the annual rewards are announced
Are we engaging our employees in the workplace? According to the latest statistics, only 36% of employees in the US are engaged in the workplace. This effectively means 64% employees are actively disengaged. I am sure the statistics in India will be more or less the same, possibly much worse.
Gallup states that high employee engagement leads to higher productivity, job satisfaction, sales and revenue. When our employees are actively engaged in the workplace, they feel happier and ready to go above and beyond to achieve the company’s goals. Another Gallup report on employee engagement shows that companies with a highly engaged workforce have 21% higher profitability. They also have 17% higher productivity than companies with a disengaged workforce.
A study on employee engagement found that companies in the US alone lose between $450-$550 billion every year due to disengaged workers. That’s partly because of employees’ lack of motivation and a lower sense of responsibility, resulting in lower productivity, errors in work, missed deadlines, poor customer service and lower profits. A single disengaged employee can cost a company about $3,400 in lost productivity for every $10,000 in salary.
One of the greatest disengagement factors is an unscientific performance evaluation system and a flawed rewards and recognition system. Many companies do performance appraisals as a ritual and most companies witness the highest rate of attrition after the annual rewards are announced. In over 16 years of research, we have found that most firms do not apply statistical standardisation of ratings to make them fair or train the appraisers to scientifically measure performance and give constructive feedback so that a person can improve. Employees who work under liberal and weak bosses get higher ratings and get more increments whereas those working under strict and saner bosses lose out. As a result the strict bosses also tend to become liberal in order not to become unpopular.
In some manufacturing, media and IT companies, we were hired to redesign and recalibrate the performance appraisal system and the total rewards structure. Based on the correction, the company noticed a significant improvement. When I had joined the largest media company as Director, HRM, the journalists were disgusted with the performance evaluation and had returned the increment letters to the chairman as a sign of peaceful protest.
We redesigned the system by involving the journalists. The new system was very well accepted and led to a lot of engagement and motivation. The system was adopted by many international newspaper companies with our consent.
Mahindra & Mahindra Group conducted a very high impact programme through us called R3. This meant training senior managers to give respect, recognition and reward to all employees. The programme had a salutary effect. A pat on the back at the right time, treating people with respect and dignity, and offering small informal rewards on a continuous basis along with huge annual performance incentives has greater effect.
A recent global employee engagement and modern workplace report showed that 84% of highly engaged employees received recognition the last time they went the extra mile at work. Not surprisingly, only 25% of actively disengaged employees were recognised for a job well done. A Harvard Business School study conducted some years ago demonstrated that 81% employees leave companies because of a bad boss and 43% are actively disengaged. The bad boss is not some kind of a devil or Satan. He/she is a person who does not know how to lead his/her team or how to inspire and motivate people. He/she is unable to build effective teams, does not delegate, cannot manage conflicts, etc. They operate out of common sense. Most organisations do not invest in training managers to be good leaders and effective people managers. If they did, it would improve their productivity, profitability and reduce attrition.
We ran an experiential Leadership and Effective People Management programme to transform the boss group of HDFC Life Insurance, HDFC Bank, Lubrizol, JSW Steel Ltd, Tata Power Ltd, TCS, etc. We saw a great drop in attrition and better job satisfaction amongst employees.
Another important area is communication. According to Trade Press Services, effective internal communication motivates 85% of employees to become more engaged in the workplace. Many companies need to work on creating transparency and improving communication. We also know that companies with a thriving corporate culture achieve over four times higher revenue growth. A strong corporate culture can improve an organisation’s financial performance significantly. According to a survey by Hays, 47% of active job seekers want to leave their job because of bad company culture. The 11-year-long research project found that companies with performance-enhancing cultures grew their revenues by a whopping 682%. Those with a poor company culture managed to increase their revenues by just 166% over 11 years.
Thus, based on research, improving culture, having a robust performance management system, giving rewards and recognition in time, and training the top leadership in effective people management can go a long way in improving engagement, which in turn will improve results and fetch higher profits.
Ashoke K Maitra
Founder and CEO, Sri Ramakrishna International Institute of Management